Dangote Sugar Refinery has declared a loss after tax of N73.76 billion for the financial year ended December 31, 2023.
The loss for the year was triggered by mounting pressure from the costs of operations among others.
Revenue increased slowly by 9.5 percent y/y in 2023FY (2022FY: +14.6%), driven by the growth recorded across its 50kg Sugar (+9.1 percent y/y | 96.6 percent of revenue), Retail sugar (+45.3 percent y/y | 2.6 percent of revenue) and Molasses (+6.5 percent y/y | 0.5 percent of revenue) business segments, as Freight income (-43.6 percent y/y | 0.3 percent of revenue) declined.
Across its geographical footprint, DANGSUGAR witnessed topline growth in its Lagos (+18.2 percent y/y), North (+2.2 percent y/y) and West (+11.4 percent y/y) regions, while revenue from the East (-6.6 percent y/y) declined.
Gross margin (-326bps) contracted to 19.5 percent, following the 14.1 percent y/y growth in cost of sales.
It was noted that the bulk of cost pressure emanated from the higher raw materials costs (+15.5% y/y | 83.4 percent of COGS), due to the high inflationary environment and local currency devaluation. Consequently, EBITDA (-414bps) and EBIT (-397bps) margins weakened to 18.7 percent and 16.5 percent in the period, respectively, further pressured by a 26.0 percent y/y growth in operating expenses.
Unavoidably, net finance costs surged by 19.6x y/y, as net exchange losses rose by 91.1x y/y to NGN172.20 billion amid the higher interest paid (+272.4% y/y) on letters of credit, lease, intercompany and bank loans.
Elsewhere, finance income (+65.5 percent y/y) grew, following a rise in short-term deposits (+6.7 percent y/y to N161.86 billion).
Similarly, fair value adjustment (+186.4 percent y/y) printed higher, driven by growth in (1) total cane plantation to 8,283 ha (2022FY: 8,092 ha), and (2) industry out-grower assumed price/ton to N34,899 (2022FY: NGN17,874).
Financial experts at Cordros Research, said, “The subpar performance underscores its sloppy operation and poor sales turnover in the year, further exacerbated by broader operational challenges, including escalating inflation, currency devaluation, and constrained consumer wallet.”
Looking ahead, “We envisage an uptick in sales volume coupled with further price adjustments to ensure decent topline growth. Even as we like management’s initiatives of containing rising costs and moderate FX dependence in the long term with the pursuit of more efficient supply chain infrastructure and backward integration projects, we believe the pressure points from rising costs and FX depreciation will remain sticky in the near term,” Cordros said.
